How Trump’s Infrastructure Gambit Will Be Turned Into Pork Barrel Waste On Capitol Hill

The Capitol Hill pols are so excited about the Donald’s trillion dollar infrastructure boondoggle that they are positively foaming at the mouth. So it’s worth paying attention to their double-talk; it’s yet another reminder that the Federal budget is indeed a fiscal doomsday machine that can’t be stopped, and that will soon send bond yields soaring and the stock market crashing.

Perhaps we are getting a warm-up session today, but the truth is you haven’t seen nothing yet. Bond yields are fixing to soar as the US Treasury and the Fed team up t0 sell massive amounts of debt on a parallel basis for the first time in history. In the upcoming FY 2019 alone that will total $1.8 trillion, and it will only get worse from there.

Consequently, the dual centerpieces of the Donald’s State of the Union address tonight couldn’t be more ill-considered. That is, he intends to bash immigrants and flog even more public debt for infrastructure, defense, border walls and disaster relief.

Yet given the shrinking native-born labor force, which is already baked into the demographic cake in the form of 10 million fewer prime-age workers over the next two decades, Trump’s planned drastic shrinkage of immigration is a colossal error. It will extinguish the only source of additional workers to grow the US economy in the decades ahead, as well as the new Tax Mules that will be urgently required in order to shoulder the massive Welfare State fiscal burden of 100 million prospective retirees by 2060.

At the same time, the Donald’s planned borrowing spree is sure to be almost entirely wasted. We don’t need any more national security than the $600 billion Trump inherited—so the $1 trillionextra he’s requesting over the next decade is sheer economic waste, as is the Mexican Wall and border control.

As to the latter, if you want less crime and violence at the border, repeal the War on Drugs. If you want “legal” immigrants, give them a guest worker permit and a route to earning citizenship by paying taxes for a decade or longer.

But above all else, don’t pile more debt on the public and private sectors to fund a Washington-based infrastructure pork barrel. It would actually retard long-term economic growth by misallocating capital and by raising the nation’s $67 trillion total debt burden (public and private combined) by another $1.7 trillion.

Moreover, its political impact would be even worse because it amounts to declaring a bipartisan open season on domestic spending—even as it opens the door to every cockamamie excuse for Federal largesse that 535 Congressional politicians can conjure.

Thus, yesterday one Democrat Congressman demonstrated exactly the kind of historical and economic illiteracy that the Donald’s infrastructure gambit will elicit. Complaining about the apparent White House requirement for an 80% local or private share of each project, he blathered as follows:

“When they built the Hoover Dam, they didn’t say, ‘Let the states do it,’ ” said Democratic Illinois Congressman Mike Quigley in an interview. “(President Dwight D.) Eisenhower didn’t say ‘We’re going to build the interstate system and the states will pay for it.’ ”

Well, no. Ike built the Interstate highway system on the principles of user fees (the Federal gas tax) and pay-as-you-go, not by resort to Uncle Sam’s credit card. And Ike managed to balance the budget three times while doing so.

Likewise, the Hoover Dam was a New Deal economic boondoggle and environmental monstrosity.

It should never have been built. And it wouldn’t have been if the Los Angelos residents who ultimately got the water and electric power had to pay for it; or if the farmers who made the desert bloom had to foot their share of the tab; or if the Las Vegas casinos that didn’t exist in a tiny town of 5,000 in 1931 had been properly tariffed; or if the downstream watersheds that have been turned into salt deserts had been given a say.

As we said in Part 1, Federal infrastructure spending ultimately boils down to interstate theft.The appropriators with seniority, committee position and power get the pork and the rest of the country gets the bill. Invariably, the result is uneconomic and wasteful projects—like the Hoover Dam—-that would never get built if they had to be paid for by direct users and local taxpayers.

So by opening up this can of worms and giving it Republican endorsement and sanction, Boondoggle Don is making a mockery of traditional GOP fiscal principles and is putting the torch to Federalism once and for all. What good are cities, for example, if they can’t assess users for sewer and water facilities or require taxpayers and users to fund local bus and subway services?

Likewise, what’s the point of state governments if they can’t tax motorists using the streets and highways within their jurisdiction or impose taxes and user fees to fund the regional and local airports which serve their population?

Stated differently, nearly the entirety of the so-called infrastructure sector consists of local, not national, economics. What is the point of 89,000 unitsof state, county, city and other local governmental entities if they can’t manage the various and sundry categories of public works and services within their jurisdictions?

When all of this gets federalized on an ad hoc basis, of course, you end up with the worst of all possible worlds. That is, random redistribution of resources among localities; waste and inefficient pork barrel allocation of funding; and a centralization of politics where the permanent governing class always wins and working taxpayers are left out in the cold.

So it is well to start with a basic proposition which puts the lie to the entire Trump infrastructure boondoggle. To wit, the only real case for Washington involvement in the nation’s infrastructure is Ike’s legacy project of maintaining the Interstate Highway System.

Moreover, the 47,700 miles of the Interstate System proper (1% of total national highway and street miles) is in pretty good shape, and from a funding point of view has most definitely not been neglected.

Since 1993, for example, public spending for highways and transportation construction generally has grown by 3.5% and 4.1% per annum, respectively. That was far more than enough to keep up with inflation—-even though much of what was actually spent was redundant or wasteful.

More importantly, if additional “investment” is needed in the interstate highway grid, then the users should pay for it with a modest increase in the gasoline tax. Or better still, Washington merely needs to rescind the earmarks that divert more than half of the existing $35 billionper year of gas tax revenues to non-Interstate Highway uses.

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